Federal Reserve Board – Federal Reserve Board releases hypothetical scenarios for second round of bank stress tests
The Federal Reserve Board on Thursday released its hypothetical situations for a next round of financial institution strain tests. Before this yr, the Board’s initially round of strain tests identified that huge financial institutions were nicely capitalized under a range of hypothetical occasions. An supplemental round of strain tests is staying performed thanks to the continued uncertainty from the COVID function.
Big financial institutions will be examined versus two situations that includes significant recessions to evaluate their resiliency under a range of outcomes. The Board will release company-certain outcomes from banks’ general performance under the two situations by the conclude of this yr.
The Board’s strain tests assistance guarantee that huge financial institutions are capable to lend to households and enterprises even in a significant recession. The workout evaluates the resilience of huge financial institutions by estimating their bank loan losses and capital levels—which present a cushion versus losses—under hypothetical